Session:8 Standard Costs and Variances
Answer Key
Principles of Accounting, Volume 2: Managerial Accounting | Leadership Development – Micro-Learning Session
Rice University 2020 | Michael Laverty, Colorado State University Global Chris Littel, North Carolina State University| https://openstax.org/details/books/principles-managerial-accounting
Questions
1. The expected price of materials per unit and the expected quantity usage are needed to help determine a standard.
3. Fixed overhead and variable overhead should be considered.
5. Paying more or less than the standard price
7. Buying a different quality level of material; good or bad purchasing/negotiation
9. A direct labor rate variance is the actual rate paid being different from the standard rate.
11. Employees have a different level of experience than standards; the labor market is tighter or looser than expected; contract renegotiation.
13. Total direct labor variance = (Actual hours × Actual rate) – (Standard hours × Standard rate) or the total direct labor variance is also found by combining the direct labor rate variance and the direct labor time variance.
15. The difference between the actual and standard amounts of the allocation base cause variable overhead efficiency variance.
17. It is caused by paying or using less than the standard amount.
19. It may not be a good outcome when buying substandard material or hiring substandard employees.
21. Causes may include substandard material, quantity discount, negotiated better price, quantity discount, or price drop.
23. Causes may include higher-quality material, better-qualified employees, or a change in manufacturing process.
25. Causes may include less-qualified employees or a change in quality level of employees due to a change in process.
27. Causes may include better material, higher-quality employees, or a change in process.